Social Surplus

… a core term used in Economic Analysis and Atlas102

Definition

Alex Tabarrok (reference below) defines social surplus as the sum of Consumer Surplus, Producer Surplus and Bystanders Surplus.

Social Surplus = Consumer Surplus + Producer Surplus + Bystanders Surplus

Tabarrok notes that social surplus is “ultimately what we care about” because “we care about not just consumers and producers, we care about everyone.” The problem is that when there are significant external costs or benefits the market will not maximize social surplus.

Atlas topic, subject, and course

Externalities (core topic) in Economic Analysis and Atlas102 Economic Analysis.

Source

Alex Tabarrok, minute 5:56 – 6:20 of An Introduction to Externalities (12-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/externalities-definition-pigovian-tax, accessed 6 May 2016.

Page created by: Ian Clark, last modified 6 May 2016.